Staying on top of the game amidst a global pandemic? Check out how this company JUST DID IT! [Monday: Marketing Marvels]
Direct-to-consumer (DTC).
―the process of selling products directly to consumers and bypassing any third party retailers, wholesalers, or middlemen.
According to a report from the World Federation of the Sporting Goods Industry (WFSGI), the shift to DTC has accelerated by 2 years due to the COVID-19 pandemic.
This is why researchers recommended that in the long-term business landscape, brands that want to continue to thrive need to aim for a 20% DTC business or higher.
One of the brands that have heeded this advice?
NIKE!
NIKE, Inc. is an American multinational corporation headquartered in Oregon. The company is the world’s largest supplier of athletic shoes and apparel and is also a major manufacturer of various sports equipment.
The brand is known for sponsoring many high-profile athletes and sports teams. The tagline, “Just Do It,” is highly recognized by lots of consumers across the globe.
The NIKE Ecosystem
Since adopting a DTC strategy in 2020, NIKE has been carefully constructing a dynamic ecosystem that supports that shift.
CEO John Donahoe said the company’s DTC strategy starts with digitally connected store concepts like NIKE Live, which makes customers feel like VIPs in-store and online through the NIKEPlus mobile shopping app…
… and the NIKE House of Innovation, a chain retailer that sells a wide range of NIKE athletic footwear, apparel, and accessories.
There’s more!
NIKE also announced in 2021 that it is planning to set up 200 small-format stores in the same model as NIKE Live in places where the brand’s sales are highest.
In these digitally connected store concepts, the company lets consumers experience the convenience of shopping. All they need to do is scan a QR code in a NIKE Live physical store then ta-da!
Consumers will be able to check out different products on their phones, dress themselves up through the NIKEPlus app’s virtual dressing rooms, and more.
According to Sarah Marzano, a retail analyst at research and consulting company Gartner,
“It’s this really smart acknowledgement that a purchase journey is sort of fragmented, and there are multiple touch points that go into a customer’s consideration process. You might visit the NIKE website while you’re considering a show. You might then want to pop into your local NIKE store to evaluate that product in person. [NIKE] keeps being really thoughtful about, ‘How do we collect the first-party data that’s necessary to knit that journey together and drive conversions?’”
Aside from creating an interconnected experience, NIKE has a strong sense of purpose that’s unique to each store. The brand’s new locations, which are notably outside malls and inside local communities, will not only open more revenue opportunities but also help establish good connections with consumers.
Personalization as key in NIKE’s Ecosystem
Even before adopting a DTC strategy, NIKE’s core has always emphasized uniqueness.
… and now, the company believes this core is even more useful in making its DTC strategy stand out from the rest of the competition.
How?
Through personalization and localization!
Each of the brand’s NIKE Live stores house a localized assortment to best suit the geography where the store is located and each wholesale partner receives different products depending on what type of consumer they serve.
For example:
Department store and retail companies Nordstrom, Dick’s Sporting Goods, and Foot Locker serve different groups of consumers. So, NIKE makes sure that whenever it delivers products to these stores, all the items are carefully sorted out based on consumers’ preferences.
This personalization and localization strategy helps NIKE identify and address consumer trends in a particular region and match an assortment of products to what’s popular in a given geography!
In the past five years, NIKE, Inc. has recorded revenues of:
- USD 34.4 billion in 2017
- USD 36.4 billion in 2018
- USD 39.1 billion in 2019
- USD 37.4 billion in 2020
- USD 44.5 billion in 2021
*NIKE, Inc. reports full-year earnings every May 31, the end of its financial year.
Clearly, the DTC, personalization, and localization strategies are effective in expanding NIKE’s reach and it is reflected in the USD 7.1 billion increase in revenue from 2020 to 2021!
NIKE, Inc.’s Earning Power: Valens Research vs. As-reported numbers
NIKE, Inc. (NKE:USA) makes for a great case study that we come back to regularly. One great reason?
The company has proven itself to be a better earning power generator than investors might think.
So, how well has NKE been growing its business in the past years?
The research doesn’t lie—nor do the results. Earning power (the blue bars) continues to show results higher on average than what traditional databases show.
The blue bars in the chart above represent NKE’s earning power (Uniform return on assets). Historically, NKE has seen generally robust profitability. Its Uniform ROA ranged from 19% to 35% in the past sixteen years, or an average of 27%. Uniform ROA is at 35% in 2021.
The global ROA is just 6%.
The orange bars are the company’s as-reported financial information. If you relied on these numbers, you will see a company with understated profitability. As-reported ROA (return on assets, a measure of earning power) only ranged from 7% to 14% in the past sixteen years. Its as-reported ROA in 2021 was only at 13%, which is almost 3 times lower than its Uniform ROA in 2021.
That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.
The company’s stock price also performed better than the rest of the stock market over the decade, which we can see in the blue line in the chart below. Its returns have been well above the market.
The numbers show that NKE has been doing well and making a profit.
The result of the company’s DTC, personalization, and localization strategies in 2021 not only made merchandise personalized to each physical store but also enhanced the online experiences of individual consumers.
As what CEO Donahoe said,
“When you open the NIKE app on your phone, it’s not just, ‘Here’s a bunch of NIKE stuff that we’re excited to sell today.’ It’s literally a vending machine of the product that’s most likely to sell to you.”
That is how NIKE’s marketing strategies helped expand its empire in 2021―by making people talk about the company’s products, services, and overall reputation in the sporting goods industry.
… and with bold and data-heavy marketing tactics even in the midst of the pandemic, the brand is able to stay true to its tagline: JUST DO IT.
NIKE’s reward?
Being recognized as a BIG name in both the in-store and online business landscape!
About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”
Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.
…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.
The true ROI in marketing can’t be separated from the business as a whole.
What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?
At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.
Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.
However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).
By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.
We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.
Hope you found this week’s marketing marvel interesting and helpful.
Stay tuned for next week’s Monday Marketing Marvels!
Cheers,
Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
Powered by Valens Research
www.valens-research.com
